Renting out a room
This content applies to England only.
Housing laws vary between England and Scotland. Get advice relating to Scotland
Before renting out a room in your home you may need permission from your mortgage lender and it may affect your tax and/or benefits.
Getting permission to rent out a room
Most mortgage agreements allow you to rent out a room in your home but you usually need permission from your lender. Check your mortgage agreement to see what it says.
If it says you need permission, it's important to get this before anyone moves in. If you don't, you could be breaking your agreement and your lender may be able to take you to court. It is not always allowed and some lenders refuse to give permission, especially if you have mortgage arrears. Contact a local advice centre if this happens. It may be possible to negotiate.
If you are a leaseholder, you will also need to check that your lease allows you to rent out a room. The Association of Residential Managing Agents (ARMA) has produced a good practice guide on the letting leasehold flats, which provides information about the issues you will need to consider.
How renting out a room affects benefit claims
If you are on income support or jobseeker's allowance, your benefits will probably be reduced if you rent out a room. It may still be worth it, however, as you could end up with more income than you would get on benefits alone. It is important to inform the Benefits Agency as soon as you start receiving rent. If you don't, you may have to pay back any benefits that you weren't entitled to.
Tax implications of renting out a room
You don't have to pay any income tax on the rent you receive if:
- you live in the same property, and
- the room you rent out is furnished, and
- the rent you receive is not more £4,250 a year
If you get more than this amount in rent, you can either choose to pay income tax on the amount over the £4,250, or pay tax on all the rent and claim tax back on any expenses involved (such as buying furniture or providing services such as cleaning).
Responsibilities as a landlord
If you rent out a room in your home, you will be responsible for:
- repairs and maintenance
- getting a valid gas safety certificate each year
- agreeing the rent and any other conditions for living in your home before your lodger moves in
- protecting your tenants’ deposit if your tenant has an assured shorthold tenancy.
You will also have to respect any rights that your tenants may have. These rights will depend on the type agreement you have with them.
If you live in the same building and share living space with your tenants, they will usually be excluded occupiers. This means that they have very limited rights but are entitled to 'reasonable notice' if you want them to leave.
What to charge when renting out a room
The amount of rent you can get normally depends on what private landlords charge for similar rooms in your area. Check local papers and shop windows to get an idea of how much landlords in your area ask for. If you live in an area where rents are very low, you will probably get more income by offering to provide services (such as meals or laundry) as part of the arrangement. However, any amounts you receive for these additional services will be included in the £4,250 you can charge before you have to pay tax (see above).
However, there is always a risk that the person renting the room may fall behind with the rent.
How renting out a room affects contents insurance
Renting out a room in your home will often affect your contents insurance. Many insurers will put up your premiums but you should still inform them if you want to be sure that your belongings are protected from theft or damage. If you don't, your insurance may no longer be valid.
Find help and advice
Working out your options can be complicated. A specialist adviser may be able to help you to look at all the possible solutions and put together a realistic and affordable proposal for keeping up with your ongoing mortgage payments and paying off any arrears you may have.
Use our directory to find a local advice service. Alternatively, contact the National Debtline, or read the guide on letting rooms in your home from Communities and Local Government.
